BILL NUMBER: SB 491	CHAPTERED  10/10/99

	CHAPTER   742
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 7, 1999
	PASSED THE SENATE   SEPTEMBER 9, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 7, 1999
	AMENDED IN ASSEMBLY   SEPTEMBER 3, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN ASSEMBLY   JULY 8, 1999
	AMENDED IN SENATE   APRIL 27, 1999
	AMENDED IN SENATE   APRIL 5, 1999

INTRODUCED BY   Senator Johnston

                        FEBRUARY 18, 1999

   An act to add Article 2.3 (commencing with Section 10134) to
Chapter 1 of Part 2 of Division 2 of the Insurance Code, relating to
structured settlements.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 491, Johnston.  Structured settlements:  transfers.
   Existing law permits a judgment awarded by a court for damages for
personal injury in resolution of a tort claim, or an award for
permanent disability for personal injuries subject to the workers'
compensation law, to be paid in periodic payments rather than a
lump-sum payment, which is known as a structured settlement.
   This bill would require a transfer of structured settlement
payment rights entered into on or after January 1, 2000, to be
preceded by a specified disclosure and to include notice to all other
interested parties.  It would also require a transfer of structured
settlement payment rights to comply with specified conditions,
including conditions as to fairness and compliance with law.  It
would prohibit the inclusion of various provisions in an agreement
for the transfer of structured settlement payment rights and would
make an agreement void and unenforceable if a prohibited provision is
included.  It would require the filing of a copy of the transfer
agreements with the Attorney General, as specified, and would
authorize the Attorney General to charge a reasonable fee for filing
a copy of those agreements.  It would exempt from these provisions,
blanket loan agreements in which the lender takes a security interest
in the borrower's assets to secure the loan.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Article 2.3 (commencing with Section 10134) is added to
Chapter 1 of Part 2 of Division 2 of the Insurance Code, to read:

      Article 2.3.  Transfers of Structured Settlement Payment Rights

   10134.  For the purposes of this article, the following terms have
the following meanings:
   (a) "Discounted present value" means the fair present value of
future payments, as determined by discounting those payments to the
present using the most recently published applicable federal rate for
determining the present value of an annuity, as issued by the United
States Internal Revenue Service.
   (b) "Expenses" means all broker's commissions, service charges,
application or processing fees, closing costs, filing or
administrative charges, legal fees, notary fees and other
commissions, fees, costs, and charges that a payee would have to pay
to transfer the structured settlement payment rights of a structured
settlement agreement or that would be deducted from the gross
consideration that would be paid to the payee in connection with the
transfer of the structured settlement payment rights of a structured
settlement agreement.
   (c) "Interested parties" means, with respect to a structured
settlement agreement, the payee, the payee's attorney, any
beneficiary irrevocably designated under the annuity contract to
receive payments following the payee's death, the annuity issuer, the
structured settlement obligor, and any other party who has
continuing rights or obligations under the structured settlement
agreement.
   (d) "Payee" means an individual who received tax-free payments
pursuant to a structured settlement agreement.
   (e) "Structured settlement agreement" means an arrangement for
periodic payment of damages established by settlement or judgment in
resolution of a tort claim in which the payment of the judgment or
award is paid in whole, or in part, in periodic tax-free payments
rather than a lump-sum payment.  A structured settlement agreement
entered into pursuant to Section 667.7 of the Code of Civil Procedure
or Section 970.6 or 984 of the Government Code is not subject to the
provisions of this article other than the requirements of Section
10138.
   (f) "Structured settlement payment rights" means rights to receive
periodic payments, including lump-sum payments, pursuant to a
structured settlement agreement, whether from the settlement obligor
or an annuity issuer.
   (g) "Transfer" means any sale, assignment, pledge, hypothecation,
or other form of alienation or encumbrance made for consideration.
   (h) "Transfer agreement" means the agreement providing for the
transfer from the payee to the transferee of structured settlement
payment rights of a structured settlement agreement.
   (i) "Transferee" means any person receiving structured settlement
payment rights resulting from a transfer.
   10135.  This article is only applicable to transfers entered into
on or after January 1, 2000.
   10136.  No transfer of structured settlement payment rights,
either directly or indirectly, shall be effective by a payee
domiciled in this state, or by a payee entitled to receive payments
under a structured settlement funded by an insurance contract issued
by an insurer domiciled in this state or owned by an insurer or
corporation domiciled in this state, and no structured settlement
obligor or annuity issuer shall be required to make any payment
directly or indirectly to a transferee, unless all of the following
subdivisions are satisfied:
   (a) Ten or more days prior to the effective date of a transfer
agreement, the transferee provides the payee with a written
disclosure statement disclosing all of the following:
   (1) The amounts and due dates of the structured settlement
payments to be transferred.
   (2) The aggregate amount of the structured settlement payments to
be transferred.
   (3) The gross amount of all expenses, if any, to be deducted from
the amount to be paid to the payee in exchange for the payments to be
transferred.
   (4) The amount payable to the payee, net of all expenses, in
exchange for the payments to be transferred.
   (5) The discounted present value of all structured settlement
payments to be transferred and the discount rate used in determining
that discounted present value.
   (6) The quotient (expressed as a percentage) obtained by dividing
the net payment amount by the discounted present value of the
payments.
   (7) A statement that the payee should consult with their own
counsel, accountant, or financial advisor regarding any federal and
state income tax consequences arising from the proposed transfer.
   (8) A statement that "THE PROVISIONS OF THIS CONTRACT ARE GOVERNED
BY CALIFORNIA'S UNFAIR PRACTICES ACT, BUSINESS AND PROFESSIONS CODE
SECTION 17200.  IF YOU BELIEVE YOU WERE TREATED UNFAIRLY OR WERE
MISLED AS TO THE NATURE OF THE OBLIGATIONS YOU ASSUMED UPON ENTERING
INTO THIS AGREEMENT, YOU MAY CALL YOUR LOCAL DISTRICT ATTORNEY OR THE
OFFICE OF THE ATTORNEY GENERAL FOR ASSISTANCE.
   No contract for the transfer of structured settlement payment
rights shall be valid unless the seller has separately acknowledged
that he or she has read the language required by this subdivision.
   (b) The transferee provides written notice of the proposed
transfer to all other interested parties 10 or more days prior to the
date specified in the transfer agreement as the date on which the
transfer agreement first becomes binding upon the payee and 60 or
more days prior to the date on which the first payment is due under a
schedule established by the structured settlement agreement.  At any
time prior to the date on which the transfer agreement first becomes
binding upon the payee, the payee may cancel the transfer agreement
without cost or further obligation, by providing written notice of
cancellation to the transferee.
   (c) The contract for transferring the structured settlement
payment rights does not violate the provisions of Section 10138.
   10137.  A transfer of structured settlement payment rights is void
unless all of the following conditions are met:
   (a) The transfer of the structured settlement payment rights is
fair and reasonable and in the best interest of the payee.
   (b) The transfer complies with the requirements of this chapter
and will not contravene other applicable law.
   (c) Notice is given in compliance with subdivision (b) of Section
10136.
   10138.  (a) A contract for the transfer of structured settlement
payment rights shall not include any provision described in the
paragraphs below, where the seller is a California resident.  Any
inclusion of a prohibited provision shall make the contract void and
unenforceable.
   (1) Any provision that waives the seller's right to sue under any
law, or in which the seller agrees not to sue, or which waives
jurisdiction or standing to sue under the contract.
   (2) Any provision that requires the seller to indemnify and hold
harmless the buyer, or to pay the buyer's costs of defense, in any
claim or action brought by the seller or on the seller's behalf
contesting the sale for any reason.
   (3) Any provision that waives benefits or rights conferred by law
with respect to garnishment of wages.
   (4) Any provision providing that the contract is confidential or
proprietary, belonging to the buyer.
   (5) Any provision in which the seller stipulates to a confession
of judgment.
   (6) Any provision requiring the seller to pay the buyer's attorney'
s fees and costs if the purchase agreement is not completed.
   (7) Any provision requiring the seller to pay any tax liability
arising under the federal tax laws, other than the seller's own tax
liability, if any, that results from the transfer.
   (8) Any provision providing for brokerage fees  incurred in the
contract to be deducted from the purchase price disclosed pursuant to
paragraph (4) of subdivision (a) of Section 10136.
   (9) Any forum selection provision providing for jurisdiction to be
in a court outside of California for any action arising under the
contract.
   (10) Any choice-of-law provision that provides for controlling law
to be other than California law in any action arising under the
contract.
   (b) This section may not be waived by agreement of the parties.
   10139.  (a) At the time notice is provided to interested parties
pursuant to subdivision (b) of Section 10136, or subdivision (c) of
Section 10137, the transferee shall file with the Attorney General a
copy of the transfer agreement, a copy of the written disclosure
statement required by subdivision (a) of Section 10136, proof of
notice to the interested parties, and a verified statement from the
transferee stating that all of the conditions set forth in Sections
10136, 10137, and 10138 have been met.  The Attorney General may
review any transfer agreement filed pursuant to this section in order
to ensure that it meets the requirements of this article.
   (b) The Attorney General may charge a reasonable fee for the
filing of the transfer agreement as provided in this section.  The
fee shall be paid by the transferee.
   10140.  Nothing in this article applies to blanket loan agreements
in which the lender takes a security interest in the borrower's
assets to secure the loan.
   10141.  Any notice required by this article shall be deemed to
have been given if addressed to the recipient's last known address
and deposited, first class postage paid, in the United States mail
not less than five calendar days prior to the date on which notice is
required.
